Five days later (on 3/16/11), The Royal Bank of Scotland cut its first quarter GDP growth estimate to 2.6 percent from 2.8 percent, citing weaker than expected housing starts data.

On March 24, Bank of America and Morgan Stanley lowered their first quarter GDP growth forecasts to 2.2 percent and 2.5 percent, respectively, following weaker than expected data on durable-goods orders.

Although slower to take a step back, Goldman Sachs early last week (on 4/4/11) also reduced its GDP growth forecast for the March quarter. The firm cut its forecast to 2.5 percent from 3.5 percent and said that there is a chance its second-half projections of 4 percent will also need to be cut. The firm pointed to higher gasoline prices and faster than expected tightening fiscal policy as some of the main reasons for the downside risk to estimates. Well, as of the present day, in some parts of the country, gasoline prices have hit $4 a gallon, and The U.S. Energy Department estimates that gas prices will average $3.86 per gallon nationally through the summer, representing a 40 percent increase on a year-over-year basis. This will surely hurt consumer confidence and present itself as a headwind to consumer spending in the short run.

Concurrently with Goldman Sachs, Bank of America, just eleven days after lowering its GDP growth estimates, again dropped its forecast (on 4/4/11), and this time lower than anyone else on the Street. Economists at Bank of America cut their first-quarter growth forecast to 1.5 percent, citing that rising commodity prices (food and fuel), flat wages, reduced credit availability, and higher saving rate are overwhelming the latest stimulus plan and squeezing consumer spending.

Lastly, early this week (on 4/12/11) Morgan Stanley took another step back, further cutting its GDP forecast, following what the company considered a very weak net export result. The firm cut its March quarter GDP growth estimate to 1.5 percent, matching that of Bank of America. On the same day, The Royal Bank of Scotland cut their estimates to 1.7 percent.

So it appears that during the beginning of the year, most economists became overly optimistic about growth for the first quarter and overshot their estimates. Now it is clear that expectations are being corrected. While growth will be tamed in 2011, there will still be growth. I believe the effects from commodity inflation will attenuate in the second half of the year, and the jobs situation will continue to moderately improve. In all, I believe yearly GDP growth in the 3 percent range is certainly achievable this year.